Easy Access A Top Reason For Employee Fraud

Jul 24, 2007 3:58 PM

More than half of financial institutions surveyed see organized crime, increased employee access to technology and poor hiring/screening practices as the main contributors to employee fraud, according to a peer-review survey from Actimize, provider of transactional risk management software for the financial services industry.

Seventy-seven percent of respondents see employee fraud becoming more sophisticated while almost the same number, 73 percent of respondents, rate the finance industry's readiness to tackle the employee fraud problem as poor to somewhat acceptable. Of those who knew, 50 percent said they have had a case of data theft in the last year and their average "largest employee fraud" incident uncovered in the last five years was $874,961, while the single largest theft reported was $6,000,000.

The survey found that 85 percent of respondents have been affected by employee fraud and 65 percent see the threat increasing. Additionally, more than 50 percent of respondents believe that half, or less, of employee fraud occurring at their institutions is being detected. Fewer than half were using automated tools or more sophisticated data mining technology, like that offered by Actimize and other vendors.

"Financial institutions have been aware of employee fraud and have been fighting the problem for years. However, with increased employee access to information and the growing sophistication of employee fraud, financial institutions are losing millions of dollars each year as insiders develop new and innovative fraud techniques to continue stealing from their organizations," says Amir Orad, EVP and CMO of Actimize. "Proper employee fraud detection technology, infrastructure and tools need to be implemented by financial institutions, in addition to proactive screening and reactive investigations, to safeguard their assets and retain customer loyalty."

Self-dealing, skimming, data-theft, embezzlement, collusion and any other fraud that originates from within the organization are included in financial institution employee or insider fraud. These attacks can result in the theft of customer data as well as the theft of customer and bank funds. Levels of preparedness according to the respondents varied for each activity; however, respondents are least prepared to detect identity shielding, which happens when one employee spreads fraud across multiple users by signing in with other employees' information.

Additional findings from the survey include:
* Nearly 70 percent of respondents said that government regulation or standards regarding employee access to customer accounts and data would hinder their company's ability to detect or prevent employee fraud.
* Respondents ranked data availability, general resource priorities and availability of tools as the top three biggest challenges in dealing with the threat of employee fraud.
* Tying as the top internal challenge related to managing employee fraud were limited technology infrastructure and understanding the scope of the problem.

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© 2009 Penton Media Inc.

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